Renters' Rights Bill

The Renters' Rights Bill is easily one of the biggest things to happen in the rental sector and it can be quite daunting, especially if you’re a landlord. The reality is, the bill is aimed at making things better for the 11 million private tenants in England rather than for landlords, which is the reality of the situation regardless of which side you’re on.

So, in this article we’ll try to make things a bit less daunting by explaining the changes that the Renters’ Rights Bill will bring and what they actually mean on the ground, as well as a breakdown of new costs that landlords may need to pocket.

Background

The Renters’ Rights Bill has been floated as an idea for quite a while now. It had been proposed by the previous Conservative government but it was then delayed due to the general election - it’s always easier to promise to do something rather than to actually do it, right? The Labour government has since picked it up and the bill moved through its initial rounds quite quickly and looks set to be codified in the summer.

The aim of the Renters’ Rights Bill is to transform and improve the private rental sector to make it more ‘fair’ for tenants, by getting rid of things like ‘no-fault evictions’ also known as Section 21 Evictions, where a landlord could evict tenants with a two month notice for any reason. Whether the bill actually brings fairness to the market remains to be seen, especially in the long term - because it might end up driving some landlords away, which will reduce the number of private housing available and end up bumping up rent prices - supply and demand, folks.

Summary of Changes by the Renters' Rights Bill

Ending ‘No-Fault’ Evictions: Landlords will no longer be able to evict tenants without appropriate grounds. An example is if the landlord wanted to sell or move into the property, the tenant would need to be issued a 4 month notice to vacate the property. As an added point, the first 12 months of any tenancy will be protected meaning the tenant cannot be evicted on these grounds within the first year.
Outlawing Rental Bidding Wars: All properties must have an ‘asking rent’ which cannot be exceeded at all - meaning landlords/agents cannot encourage or accept offers that are higher than the stated asking price - which must be at market value.
Private Rented Sector Landlord Ombudsman: A new ombudsman will be set up which landlords will need to register with. This service will be paid for by the landlord.
Private Rented Sector Database: An online database will be created which landlords must provide their details to - this will provide a picture of how many properties are being privately rented and whether they’re meeting standards. Again, landlords will have to pay to register.
No Discrimination Against Families with Kids or Pets: Landlords cannot refuse to let their property to a family with children or to those with pets. Appropriate insurance would need to be obtained where a tenant has pets.
Awaab’s Law: Any hazards such as dampness or mould would need to be fixed within a specified time period. The time period hasn’t been determined yet.
Decent Homes Standard: Similar to Awaab’s Law, all properties would need to meet particular standards which are to be determined.
Rent Increases Once a Year: Rent can only be increased once a year, to the market value. Mid-year rent increases or rent review clauses in contracts will no longer be allowed.
No More Shorthold Tenancies: Tenancies will no longer have an end date (e.g. 12 months contract). Landlords and tenants would need to provide notice to end the contract (anywhere between 2 weeks to 4 months for landlords depending on grounds, and usually 2 months for tenants depending on reason for moving out)

Changes in Detail

End of No-Fault Evictions

No-fault evictions refer to the practice of a landlord giving 2 months’ notice to the tenant to vacate the property, for whatever reason or for no reason. For example, if a landlord wanted to sell the property, rent it out to new tenants or get renovations done, they’d be able to evict the tenant by merely providing a 2 month notice.

We can see both sides to this point. From a tenant’s perspective, no-fault eviction means they won’t ever feel a sense of security and probably won’t see their house as their home. And from a landlord’s perspective, having the ability to give a notice to tenants for eviction gives them the affirmation that they have fundamental control and right over the property which they legally own.

The Renters’ Rights Bill states landlords will need fair grounds to evict tenants. The government website lists these grounds, each of which has a different corresponding notice period. For example, if the landlord wanted to sell the property, the tenant would need at least a 4 month notice. If the tenants are in arrears for three consecutive months, or have persistently been in arrears for a period of time, they may be evicted with a 2 week notice. Furthermore, if the tenant engaged in anti social behaviour at the property or was convicted for rioting, a landlord would have grounds for an eviction with a notice period of only two weeks.

(Full list of grounds can be found here, you’d need to scroll down a little to see the table.)

Although the stated grounds and their corresponding notice periods might appear to be watertight and straightforward, we know things are usually more complicated in reality and disputes will likely arise. In this case, where the landlord or tenant wants to appeal the eviction, they may initially speak between themselves to see if they can come to a resolution. If no resolution is achieved, they’d need to turn to the Private Rental Sector Landlord Ombudsman who would mediate the dispute. If the dispute remains unresolved at this stage, it would then be escalated to legal proceedings in court. Given the legal backlog that still remains, any disputes will likely linger for a long time before they get their turn in court - which will only add to the frustrations either side will experience.

No More Rental Bidding Wars

The Renters’ Rights Bill outlaws rental bidding wars which is when the landlord or agent posts an offer price, and tenants then try to outbid each other to make the winning offer. For instance, if a property is listed for £1,500 a month, and prospective tenants make higher offers like £1,550 or £1,600 to outspend other competing tenants and get the winning bid.

Under the bill, all landlords or agents will need to list an ‘asking rent’ which must be at market value. Any offers that are higher than the asking rent cannot be encouraged or accepted - meaning landlords/agents can only accept offers that match the listed price. It will be illegal to accept higher offers under any circumstances.

It’s still at the landlord or agent’s discretion to accept whichever offer they choose to move forward with and the way they manage their screening processes such as background checks and references, provided there aren't any discriminatory practices.

Private Rented Sector Landlord Ombudsman

An ombudsman is a government service that investigates and resolves complaints and disputes. In this case, a Private Rented Sector Landlord Ombudsman will be a service that primarily addresses tenant issues and complaints about their landlord. This can be anything from not having fair grounds for eviction to landlords failing to fix hazards at the property and so on.

The aim of having an ombudsman in place is to bring a definitive and binding redress service for tenants against their landlords. It’s important to note, landlords cannot seek redress with this service, it’s only for tenants as the aim of the ombudsman is to protect consumer rights.

According to the government website, landlords will need to make a “small annual fee” per property to the ombudsman in order to pay for the service. The precise fee hasn’t been decided yet but the website mentions that it will be proportionate and good value.

Private Rented Sector Database

All landlords will need to register to join the Private Rented Sector Database which will effectively be a register for all rented properties in England. The database will contain information about the property which can be accessed by tenants, as well as landlord information. The database will also support sending out guidance to landlords as well as communicating any changes in requirements.

It’s important to note that registering on the database will be a legal requirement for all private landlords. A property will not be allowed to be marketed or let until it’s on the database.

Although the precise information that will be on the database hasn’t been decided yet, the government website does mention it will relate to property standards and that local councils will have access to it. That implies the database will be used to check if properties are compliant and if not, enforcement action will take place by local councils.

Again, landlords will need to pay for registering on the database. The cost hasn’t been decided yet but the website says it will be proportionate and good value.

No Discrimination against Tenants on Benefits, with Children or with Pets

Landlords will not be able to refuse tenants because they are on benefits. The guidance states affordability checks should still apply but this should not take into account whether the tenant is on benefits or not.

Landlords will not be able to refuse tenants because they have young children. The guidance allows for each tenant to be reviewed on a case-by-case basis to ensure the property is suitable for their needs. For example, if there is a family of four including two young children, a landlord may have grounds to refuse them if the property only has one bedroom and overcrowding rules are breached. But where there aren’t fair grounds like this, refusing tenants because they have children would count as rental discrimination.

Finally, a landlord will not be able to refuse tenants with pets unless there are ‘reasonable’ reasons. ‘Reasonable’ hasn’t been defined yet so we’ll need to wait to see what the grounds are. But we do know one thing that won’t be considered as reasonable, which is potential damage to the property caused by pets. The government will institute landlords have appropriate insurance in place to cover any potential damage by pets - so that would be things like fleas in the property, damage to furnishings, etc.

Awaab’s Law

Awaab’s Law, as part of the Renters’ Rights Bill, states that landlords must fix property hazards within a specified time period of being reported by the tenant. According to the government website, hazards include dampness and mould.

The specified time period ironically hasn’t been specified yet, but it will be a legal requirement for landlords to provide a fix in that time.

Decent Homes Standard

Similar to Awaab’s Law, a standard will be created for all properties to adhere to, to ensure the property is safe and fit for tenants to occupy. The exact standard hasn’t been determined yet so it remains to be seen what this relates to, however the government website does mention most landlords already provide decent homes for tenants to live in, so we’re sure it’s a case of entrenching what good landlords are already doing anyway.

As an added note, where properties don’t meet the standard, enforcement responsibility will fall to the local council. The local council will have a number of mechanisms they can use against landlords including giving an improvement notice to meet a particular requirement within a particular timescale.

Controlled Rent Increases

According to the Renters’ Rights Bill, rent increases will only be allowed once per year and must be in line with the market value. Market value is defined as how much the property would list for if it was advertised on the market.

The bill also brings an end to mid-year rent increases and rental review clauses in contracts. Also, where rent is to be increased, the new price must come with a minimum of 2 months’ notice to tenants.

End of Shorthold Tenancies

There are different types of residential tenancies, the most common of which is the assured shorthold tenancy (AST). An AST is the standard 12 month tenancy contract, where at the end of the contract, it is renewed or ended. It’s usually at this point tenants leave the property or rent is increased as a fresh contract comes into play.

The Renters’ Rights Bill will get rid of ASTs and will replace it with periodic tenancies, which are basically tenancies with no end date. That means, the way to end a tenancy would be for the landlord to provide sufficient notice on fair grounds, or for the tenant to provide 2 months’ notice to leave the tenancy.

Landlord Costs and Considerations

Landlord costs will increase. According to the bill, as it stands, there are three known costs landlords will need to cover:

Application to Private Rented Sector Landlord Ombudsman
Registration with Private Rented Sector Database
Cost of adding an insurance policy to cover damage to property caused by pets

There might also be some unknown costs that landlords will need to cover, which relate to upgrading the property to bring it in line with new standards and requirements like the Decent Homes Standard. This might need some DIY or renovations.

Landlord Mitigations

Landlords can mitigate some of the costs or risks associated with the Renters’ Rights Bill in a few ways:

Thorough Screening

Given the bill empowers and provides more security for tenants, it will become even more imperative that you find good people to occupy your property. That means, carrying out detailed screening checks to ensure you get the best tenants that will become reliable, long-term occupants who respect your property and make it their home. Screening checks usually include right to rent checks, as well as credit and occupation checks, and references.

Landlord Insurance

A lot of insurance policies on the market offer additional safeguards for landlords which, of course, come at a premium but are absolutely worth their salt. For example, as part of landlord insurance, you can add a rent guarantee policy which covers your monthly rent payment when tenants don’t pay. Rent guarantee policies also tend to cover the cost of legal proceedings and evictions, such as court fees.

Property Management Company or Letting Agents

In the spirit of being objective and unbiased (as we’re a property management company), we think it’s important to have an experienced agency by your side. In the current environment, things can already be overwhelming for landlords but with the Renters’ Rights Bill, things will be even more stringent. So, it’d be important to have some professionals by your side who can help you to navigate the process and keep you compliant.

Remember, failure to meet any of the requirements of the bill can lead to prosecution and significant fines.

Honest Lettings offer a full management service to residential and portfolio landlords for only £99 per month (incl. VAT) with zero setup or additional fees. For this small fixed fee, we will manage your property to an exceptional standard and ensure you are always compliant.